Class-action lawsuit alleges 4 drugmakers colluded to restrict insulin sales to 340B contract pharmacies

Gavel and flag in courtroom
The new class-action lawsuit is the latest legal fight to erupt over several drugmakers' moves last summer to restrict sales of 340B drugs to contract pharmacies. (Getty/AlexStar)

Four major drugmakers colluded when they restricted sales to contract pharmacies of insulin discounted under the 340B program, a new class-action lawsuit alleges.

The federal lawsuit filed late last week by Mosaic Health, a New York-based collection of 22 safety net clinics, is the latest legal action over the drugmakers’ moves to restrict 340B contract pharmacy sales. The Biden administration demanded drugmakers reverse the restrictions, but several have sued to continue them.

The class-action lawsuit alleges that Sanofi, Eli Lilly, Novo Nordisk and AstraZeneca colluded in the summer of 2020 to restrict offering discounted products to 340B contract pharmacies.

The drugmakers should compete against each other, but instead “they worked together to boost their profits by coordinating to retract a long-standing discount for safety-net hospitals and clinics,” the lawsuit filed in the U.S. District Court for the Western District of New York said.

Mosaic argues that last summer the four drugmakers spent millions lobbying the federal government to limit 340B drug discounts for diabetes medicines such as insulin.

However, former President Donald Trump in July 2020 issued an executive order that aimed to ensure 1,000 community health centers would get insulin and injectable epinephrine at the 340B discounted rate.

RELATED: Supreme Court agrees to hear lawsuit challenging HHS’ 340B cuts

The lawsuit alleges that after the order, the drugmakers realized their lobbying efforts would fail and colluded to eliminate or limit 340B contract pharmacy discounts for their drugs, including their insulin products.

“Indeed, on July 24, 2020, the very same day that executive order was issued, the first defendant, AstraZeneca, revealed its intention to restrict contract pharmacy 340B drug discounts,” the lawsuit said. “The other defendants executed similar plans in short order.”

The lawsuit argues that the drugmakers had to have colluded, because if one had acted alone “it would have risked losing significant market share in the lucrative markets for diabetes treatments.”

The lawsuit argues the four companies are responsible for the overwhelming amount of diabetes drugs such as incretin mimetics, rapid-acting analog insulins and long-acting insulin purchased by 340B contract pharmacies.

Eli Lilly did give a special exception for contract pharmacies to pass along certain insulin products at cost, but the lawsuit argues that the “exception was infeasible for covered entities and pharmacies, as it required the contract pharmacies to fill prescriptions without any fee whatsoever.”

The lawsuit argued the exception was “so narrow that it was virtually meaningless: Lilly prevented the collection of any revenue by a covered entity to offset the dispensing fee the covered entity would have to pay the contract pharmacy.”

Eli Lilly shot back that the lawsuit was "baseless."

"We have offered to supply our penny priced insulins at the 340B price to any contract pharmacy that commits to passing the discount directly to the patient without limitation," the company said in a statement to Fierce Healthcare.

Sanofi told Fierce Healthcare that the company started collecting claims data on 340B drugs dispensed by the contract pharmacies. The goal of the data is to ensure the company can avoid duplicative discounts for 340B and Medicaid drugs, and the drugmaker argues the move is in compliance with the 340B statute.

AstraZeneca said that its contract pharmacy requirements "fully complies with all operative requirements and continues to support the mission of the program," according to a statement to Fierce Healthcare

Novo Nordisk said that it disagrees with the lawsuit's allegations and that the 340B program has been "the subject of significant and well documented abuses, resulting in program intermediaries such as contract pharmacies profiting at the expense of patients."

Latest turn in long feud

Drugmakers agree to offer discounted products to 340B-covered entities which include safety net hospitals, community health centers and clinics. In return, the drugmakers can participate in Medicare and Medicaid.

But drugmakers have been chafing at the program for the past several years, arguing it has gotten too big and that the discounts are not trickling down to patients. Providers, in turn, say that the program is vital to help safety net providers that operate on thin margins handle ever-increasing drug prices.

More and more covered entities have contracted with third-party pharmacies to dispense 340B drugs to patients. Drugmakers argue that the restrictions against contract pharmacies are an attempt to avoid duplicate discounts given to providers under 340B and Medicaid, but hospitals and other providers argue the moves are an end run to avoid offering the discounts.

The lawsuit is the latest move in an escalating legal feud over the moves.

The Biden administration warned six drugmakers, including the four listed in the lawsuit, over their decisions to restrict sales and called for them to knock it off.

However, Eli Lilly, Sanofi and Novartis sued the federal government in June, arguing the moves are legal under the 340B statute.